World Bank sees dreary gold prices, silver and platinum to outperform in 2021
In its April commodity report, the international financial institution said that it expects gold prices to average this year around $1,700 an ounce. Analysts expect average gold prices to fall to $1,600 in 2022.
The World Bank's gold outlook comes as prices struggle to find enough bullish momentum to push through $1,800 an ounce. June gold futures last traded at $1,787.50 an ounce, up 1% on the day.
Gold's lackluster performance so far this year is even more startling when compared to the broader commodity market.
"Almost all commodity prices now exceed their pre-pandemic levels, and those of some commodities, notably metals, are well above their previous levels—copper prices were nearly 50 percent higher in March 2021 relative to the end of 2019. The recovery has been driven by the improving global economic outlook, aided by significant monetary and fiscal stimulus in advanced economies, and steady, although uneven, vaccination rates," the analysts said in the latest commodity report.
Looking at the entire metals complex, the World Bank said that it sees price rising 30% this year with a correction in 2022 as the global economy starts to normalize. In comparison, the analysts expect that gold prices will fall 4% this year as investment demand weakens due to an improving economy and rising bond yields.
"Higher real yields make gold less attractive to investors. Gold-backed exchange-traded funds holdings have also fallen sharply in recent months, and central banks have reduced gold purchases. Physical demand is recovering from a substantial decline in 2020 but remains well below pre-pandemic levels," the analysts said.
However, the World Bank noted two silver linings in the precious metals market.
The analysts said that they expect silver prices to rise 22% this year. Improving industrial demand for silver should help prices average around $25 an ounce this year. The bank sees prices falling in 2022, averaging the year around $22 an ounce.
"Prices were lifted by a rebound in industrial demand (electronics, autos, and solar power), which accounts for more than half of silver consumption (compared to less than 10 percent for gold). Investment demand has also been robust, with investors holding net-long positions since mid2019," the analysts said.
Silver continues to outperform gold prices. July silver futures last traded at $26.495 an ounce, up 2.40% on the day.
The World Bank also sees potential for platinum prices. They noted that prices rallied 24% in the first quarter. They added that they expect prices to rally 25% this year.
"Jewelry demand bounced back, while demand from the auto sector was bolstered by a strong recovery in auto manufacturing. The implementation of tighter emissions standards in China and Europe boosted platinum use in autocatalytic converters," the analysts said.
Platinum prices are expected to average 2021 around $1,100 an ounce. For next year, prices are expected to average around $1,110 an ounce.
July platinum futures last traded at $1,222 an ounce, up more than 1% on the day.